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Vaselesa [24]
3 years ago
5

Assume you just deposited $1,000 into a bank account. The current real interest rate is 2%, and inflation is expected to be 6% o

ver the next year. What nominal rate would you require from the bank over the next year? How much money will you have at the end of one year? If you are saving to buy a fancy bicycle that currently sells for $1,050, will you have enough to buy it?
Business
1 answer:
solmaris [256]3 years ago
6 0

Answer:

Part 1:

Nominal rate=8.12%

Part 2:

FV=1000(1+0.0812)^1\\FV=\$1,081.2

$1,081.2 is the money you will have at the end of one year.

Part 3:

The Saving account is short of $31.8 ($1113-$1081.2) to buy the bicycle after 1 year because of inflation.

Explanation:

Real Interest rate=2%

Inflation rate=6%

Deposited amount=$1000

Part 1:

Formula:

Real interest rate=\frac{1+Nominal\ rate}{1+inflation\ rate}-1

2\%=\frac{1+Nominal\ rate}{1+6\%} -1\\Nominal\ rate=[(0.02+1)*(1+0.06)]-1\\Nominal\ rate=0.0812

Nominal rate=8.12%

Part 2:

How much money will you have at the end of one year can be calculated as:

FV=PV(1+i)^n

where:

FV is the future value

PV is the present value=$1000

i is the Nominal interest rate (Calculated above)=8.12%

n is the number of years=1 year

FV=1000(1+0.0812)^1\\FV=\$1,081.2

$1,081.2 is the money you will have at the end of one year.

Part 3:

Calculating the price of bicycle after one year due to inflation:

FV_{bicycle}=PV(1+inflation\ rate)^n\\FV_{bicycle}=1050(1+0.06)^1\\FV_{bicycle}=\$1113

The Saving account is short of $31.8 ($1113-$1081.2) to buy the bicycle after 1 year because of inflation.

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Answer:

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Explanation:

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Probably the most important part of a contract is the existence of an offer and acceptance. Once a valid offer is accepted, it binds the parties into a valid contract.

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3 years ago
Water Technology, Inc. Incurred the following costs during 20xt. The company sold all f ts products manufactured during the year
Thepotemich [5.8K]

Answer:

Part 1

<u>Variable Costs </u>

Direct material                                                           $5,000,000

Direct labor                                                                $2,400,000

<u>Fixed Costs</u>

                                                                                           $

Utilities (primarily electricity)                                         120,000

Depreciation on plant and equipment                        220,000

Insurance                                                                       150,000

Supervisory salaries                                                     400,000

Property taxes                                                              230,000

Salaries of top management and staff                        372,000

Office supplies                                                               45,000

Depreciation on building and equipment                    80,000

Part 2

<u>Forecast the 20x2 cost amount for each of the cost items listed</u>

Direct material ($5,000,000  x 1.20)                      $6,000,000

Direct labor (2,400,000 x 1.20)                               $2,880,000

Utilities (primarily electricity)                                       $120,000

Depreciation on plant and equipment                     $220,000

Insurance                                                                    $150,000

Supervisory salaries                                                 $400,000

Property taxes                                                           $230,000

Salaries of top management and staff                     $372,000

Office supplies                                                            $45,000

Depreciation on building and equipment                $80,000

Explanation:

Variable Costs vary with the level of production. Examples are Direct Materials and Direct labor.

Fixed Costs remain constant for any production level. Examples are Depreciation and Utilities such as electricity.

A growth in Sales will affect the Variable Costs only. As production increases to meet the 20 percent growth in sales so do these costs since they vary in direct proportion to the level of production.

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The American economy is based on both capitalism and free enterprise. What does this mean?
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Answer:

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2. Since Emilie works in the accounting department, she is aware that profits are going to fall short of analysts' projections. She tells her aunt to sell stock in the company before the earnings release date.

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4 0
3 years ago
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Answer:

(a)

January 1  Cash                      20000 Dr

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(b)

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                          Cash                       850 Dr

Explanation:

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The ineterst is paid at 8.5% annually. The annual interest oayment equals 20000 * 0.085 = 1700

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3 years ago
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